Birchbox, StitchFix, Bark Box, Graze… what do these brands have in common? These are just a few brands that have pioneered the subscription box terrain and have proven the success of a simple, yet creative business model. Over the last five years, these brands have achieved major success through out-of-the-box retail. Browse through MySubscriptionAddiction and you will notice there’s a sub box for everyone. From your traveling cousin that wants a taste of the world at home, to your niece that has an insatiable curiosity, there’s a creative subscription box waiting to be envisioned. What started as a market filled with beauty brands has ballooned into a diverse industry with specialty boxes fulfilling a multitude of interests.

How can small and boutique retailers capitalize on this trend of subscription boxes? Let’s start by reviewing industry trends.

Old Model, New Tech

You may be familiar with subscription models for newspapers and magazines, as well as Wine of the Month clubs. Without the technology of today, many of these early subscription-based models struggled to take off. New technology, better fulfillment and delivery methods coupled with an open economy has allowed new brands to embrace this model and grow. Now, new subscription-based companies can promote their service on social media and leverage the power of influencers, while staying on top of trends, managing customer service issues efficiently, and fulfilling orders without gaps. All of these new technologies make it easier for the modern subscription box model to succeed.

Subscription Box Growth In 2017

This subscription box business model’s growth over the last three years has been tremendous. The first modern subscription box is agreeably Birchbox. Birchbox made its debut in 2010, and swelled to 800,000 subscribers in 2014. From 2012 to now, the subscription box economy has grown 3,000% with more than $3 billion in sales!  The majority of that growth comes from women age 35+ with an household income of $75+.  All of this growth underscores what a tremendous opportunity this model could be for a boutique retailer.

Although there’s a wide variety of offerings, health and beauty leads the pack, with food, pet and apparel not far behind. The most successful boxes combine convenience, new products, and a bit of excitement with a curated touch.

Pros & Cons of Subscription Boxes

The greatest advantage the subscription model offers the retailer is predictability. This reliable recurring income is good for the economy and is also extremely rewarding for your bottom line. Other advantages include:

  • the opportunity to market and up-sell customers
  • ease of creating long-term relationship
  • steady, passive income
  • reduces the burden of data collection, and
  • a lower customer acquisition cost

The disadvantages include:

  • subscribers may demand more value
  • must maintain an element of surprise to reduce boredom
  • the churn rate (the annual percentage rate at which customers stop subscribing) must be constantly monitored

Challenges and Advantages by Industry

Along with the general pros and cons, each vein of retail has its own set of challenges and advantages. When it comes to beauty subscription boxes, the most common sub box, you may encounter tighter competition. As big retailers like Target, Wal-Mart and Amazon enter the ring, you have to make sure your brand is unique and true. Authenticity is the only way to win this battle.

Next on the popularity list is food subscription boxes.  A food subscription box has a unique advantage in that it does not create clutter or waste. Once the meal is prepared, the food is eaten and there are no materials remaining – except maybe some delicious leftovers. This a significant advantage for customers as it reduces material fatigue. With food-based subscription boxes, the items are perishable so your shipping process must be efficient and top notch. Nothing will alienate customers faster than receiving a box of less-than-fresh food.

Pet subscription boxes have a few distinct advantages. They’re the newer version of subscription boxes, so the pet model benefits from a clearly defined audience of loyal pet lovers, and low competition. This creates tremendous opportunity for a boutique retailer to elevate their brand and grow sales.

Finally, there’s the apparel subscription box. This is the most challenging category. Clothing and fashion is personal, and it many be hard to satisfy everyone. Having a heavily targeted demographic and amazing customer service is critical. Apparel subscribers have the highest rate of “social venting”, so have your social strategy and response management in place on day one. With these disadvantages, you may question the reward. Don’t. Apparel is not oversaturated and the right theme can explode. Work with amazing collaborators. If you’re a small local retailer, partner with area tailors that can modify the fit for your customers, ensuring that they will love their new finds every month.

Create an amazing customer experience, and you can win big with a subscription box.

 

K2forma is a strategy-driven creative agency founded in 2007.
We help build brands and find audiences. Contact us and we will do this for you.